Anderton's political career began when he was elected to the Manukau City Council in 1965. In 1984, Anderton successfully stood as the Labour candidate for Sydenham in Christchurch. However, he soon came into conflict with the party's leadership, and became an outspoken critic of the Fourth Labour Government's free-market reforms, called Rogernomics. In April 1989, believing that Labour was beyond change, Anderton resigned from the party.

In 1960, he married Joan Caulfield and they had five children, two girls and three boys.[4] The same year he became the paid organiser for the Catholic Youth Movement in the Catholic Diocese of Auckland, and later worked as the secretary for the Catholic diocese in Auckland. He later moved into business, working as an export manager for a textiles company before establishing a manufacturing company, Anderton Holdings, with his brother Brian in 1971 and also bought a superette in Parnell.[4]

Anderton joined the Labour Party in 1963 and first attended a Labour party branch meeting in Mangere in 1964.[4] His political career began in 1965 when he was elected to the Manukau City Council on a Labour ticket. In 1971, he stood for the Auckland City Council as a Labour candidate unsuccessfully and was the highest polling un-elected Labour candidate.[5] Three years later he challenged Dove-Myer Robinson, the incumbent Mayor of Auckland City, for the mayoralty, but was beaten by 7,000 votes. In the same local election, he also stood for the Auckland City Council and was successful.[6][7][8] Anderton had another tilt at the Auckland City mayoralty in 1977, but was again beaten by the incumbent.[6][9][10] In the 1977 local elections, he was successful in joining the Auckland Regional Authority.[6] At the same time, he worked his way up the internal hierarchy of the Labour Party. He became the party's president in 1979, a year before his term with the Auckland Regional Authority ended. He was also a long-standing member of the party's policy council.

Anderton's severe criticism of Douglas and his reforms earned him the enmity of many within the party, including some of those who otherwise shared Anderton's frustration; his public comments were seen as damaging the party's public image. His stance of vocally and publicly opposing Labour's neoliberal direction led him to eschew the prospect of becoming a cabinet minister in the Lange ministry.[4]

Although many ordinary members of the Labour Party (who were unhappy at the way the party's parliamentary wing was behaving) backed Anderton, he became increasingly isolated in parliament. When Anderton disobeyed party instructions to vote in favour of selling the Bank of New Zealand (which Labour had explicitly promised not to do), he was suspended from caucus. In April 1989, believing that Labour was beyond change, Anderton resigned from the party. He later said, "I did not leave the Labour Party; the Labour Party left me."[12] All but one of Anderton's electorate staff in Sydenham left with him.[4]

On 1 May, Anderton announced the creation of the NewLabour Party, intended to represent the real spirit of the original Labour Party. Its primary goals were state intervention in the economy, retention of public assets, and full employment. In the 1990 general election Anderton retained his Sydenham seat, ensuring that NewLabour (and Anderton's criticism) would not fade away. A long serving office manager and campaign director, Jeanette Lawrence, said Anderton retaining his seat at the 1990 general election was the "happiest she ever saw him".[4] He was the first MP in New Zealand political history to leave an established party, found another and be re-elected to Parliament representing that new party. In parliament, Anderton attacked the policies of the new National Party government, particularly Ruth Richardson's continuation of Rogernomics.

In regard to leaving Labour in 1989, he later recalled: "I have no regrets about any of that. Under the same circumstances I would do exactly the same again."[12] Anderton was awarded the New Zealand 1990 Commemoration Medal.[13]

Anderton and NewLabour were at the centre of the Alliance Party established in 1991. He became leader of the new party and in the 1993 election, was joined in parliament by Alliance colleague Sandra Lee. He briefly stepped down as leader of the Alliance for family reasons in November 1994, but was persuaded to return in May 1995.[citation needed]

In the 1996 election, the first to be held under the mixed-member proportional (MMP) system, the Alliance won 13 seats in Parliament. Anderton retained his constituency seat (by this point, the electorate was renamed Wigram) and he was joined in Parliament by 12 List MPs.

Anderton was the most prominent critic of the rash of party-switching (sometimes called "waka jumping" in New Zealand) that characterised the 45th Parliament, although remained silent about his own past party-switching. When Alamein Kopu, a list MP from his party, declared herself an independent and supported the National-led coalition, Anderton blasted her, saying her behaviour "breached every standard of ethics that are known." He later started a "Go Now" petition calling on Kopu and every other party-switching MP to resign; like Anderton himself in 1989 they chose not to resign. When Kopu founded her own party, Mana Wahine Te Ira Tangata in support of the government, Anderton suggested that the new party's creation smacked of corruption – as a party leader rather than a mere independent, Kopu received an additional $80,000 in funding.[citation needed]

By the late 1990s, Labour under Helen Clark had largely purged itself of the influence of Roger Douglas. Realising that the cost of a split in the left-wing vote would be a continuance of the National government, Labour and the Alliance agreed to form a coalition for the 1999 election. Anderton became Deputy Prime Minister after National lost the election. He was also given the newly created post of Minister of Economic Development, which had an emphasis on job creation and regional development initiatives. Anderton also co-authored the New Zealand Superannuation Fund, a sovereign wealth fund to partially pre-fund the future cost of universal superannuation, with Finance Minister Michael Cullen.[12]

The successful establishment of Kiwibank, a state-owned bank, is often cited as Anderton's greatest achievement.[12] It was initially opposed by both Clark and Cullen but Anderton eventually wore the Labour Cabinet down following several months of debate culminating with Annette King telling Cullen, "For God's sake, give him the bloody bank".[14]

Anderton, along with fellow Alliance MP Laila Harré, was also an invaluable advocate in the creation and implementation for 12 weeks' paid parental leave.[12]

Towards the end of the parliamentary term Anderton came into conflict with the Alliance's administrative wing. Party president Matt McCarten and his allies claimed that the Alliance had become too close to Labour, and that it should take a less moderate path; Anderton replied that some moderation was required for the Alliance to accomplish any of its goals. There were complaints that Anderton was too dominant in the party's decision-making and over the fact that he supported the government's stance on the bombing of Afghanistan, while the executive and wider membership opposed it. Eventually, Anderton and three other MPs left the Alliance, establishing the Progressive Coalition, later renamed the Progressive Party. In order to get around the Electoral Integrity Act, which had been passed largely because of Anderton's complaints about waka jumping, Anderton technically remained the Alliance's parliamentary leader until the writ was dropped for the 2002 election.

In the election, Anderton was returned to Parliament, and the Progressives took the Alliance's place as Labour's coalition partner. Although Anderton won his electorate, the small amount of support the Progressives received (1.4% of the party vote) was enough for only one other Progressive – deputy leader Matt Robson – to enter Parliament. Anderton gave up the deputy prime minister's post to Minister of Finance and Labour deputy leader Michael Cullen. He remained Minister of Economic Development, and also held other ministerial portfolios. He ranked third in Cabinet, behind Clark and Cullen.

In the runup to the 2005 election Anderton renamed his party "Jim Anderton's Progressive Party". However, he was the only Progressive returned to Parliament by a narrow margin after many left-wing voters voted for Labour to prevent a National government from being elected due to a split on the left. He became Minister of Agriculture, Minister for Biosecurity, Minister of Fisheries, Minister of Forestry, Minister Responsible for the Public Trust, Associate Minister of Health, and Associate Minister for Tertiary Education.

The 2008 election saw a swing to the right, with National winning approximately 45% of the party vote to Labour's 34%. Anderton retained his seat but the Progressives' share of the party vote remained low, at less than one percent.[15] In a move described as "unorthodox" by the New Zealand Herald, Anderton announced that he would remain in coalition with Labour in opposition. He said that a priority for the Progressives would be to support better access to dental care.[16]

Anderton announced in May 2010 that he would contest the Christchurch mayoralty.[17] He initially said that if elected to the mayoralty he would not give up his seat in Parliament because he didn't want to cause an expensive by-election.[18] However, following the 2010 Canterbury earthquake Anderton announced he would stand down as MP for Wigram if elected mayor so he could fully focus on rebuilding the city.[19] Anderton was leading the polls until the earthquake hit. He lost the election, taking 40.6% of the vote to incumbent mayor Bob Parker's 53.7% of the vote, with the rest of the vote split amongst numerous minor candidates.

Anderton retired from Parliament at the 2011 election. The Progressive Party did not run candidates in that election. At the time, he held the unofficial title of Father of the House as the longest continuously serving MP. During the election campaign, Anderton endorsed Labour candidate and previously unsuccessful mayoral candidate Megan Woods to succeed him in his electorate.[20] Woods was elected.[21] After his retirement, he put his energy into a campaign to have ChristChurch Cathedral restored after it had been severely damaged in the February and June 2011 Christchurch earthquakes; he worked on this campaign with former National MP Philip Burdon. They were ultimately successful in September 2017 when the Anglican synod made a binding decision to restore the church.[22]